- (Topic 2)
An independent contractor status is indicated if the worker:

1. A. Receives a Form W-2.
2. B. Completes a Form W-4.
3. C. Is not required to complete Form I-9.
4. D. Is not required to complete Form W-9.

Correct Answer: C
✑ Independent contractors DO NOT complete Form I-9, as they are not employees underIRCA (Immigration Reform and Control Act).
✑ Employees receiveForm W-2and completeForm W-4.
✑ Independent contractors completeForm W-9for tax reporting. References:
✑ IRS Independent Contractor Guidelines (Publication 1779)

- (Topic 1)
Which of the following amounts is subject to federal income tax withholding?

1. A. 401(k) Deferral
2. B. Salary Advance
3. C. Military-Related Moving Expenses
4. D. Health Savings Account (HSA) Contribution

Correct Answer: B
Comprehensive and Detailed Explanation:Federal income tax withholding applies to most forms ofemployee compensation, butsome benefits are tax-exempt.
✑ Option A (401(k) Deferral)is incorrect because pre-tax contributions to atraditional
401(k)arenot subject to federal income tax(but are subject to FICA).
✑ Option C (Military Moving Expenses)is incorrect becausequalified military moving expensesare excluded from taxable income under theTax Cuts and Jobs Act (TCJA).
✑ Option D (HSA Contribution)is incorrect becausepre-tax HSA contributionsmade through payroll deductionare tax-exempt.
✑ Option B (Salary Advance) is correctbecause anyadvance on future wagesis treated astaxable compensation when paid, and income tax must be withheld.
Reference:
IRS Publication 15 – Taxable and Non-Taxable Compensation Payroll.org – Payroll Taxable Income Guidelines

- (Topic 1)
Which of the following forms is used to report federal income tax withheld from payments to an independent contractor?

1. A. Form 940
2. B. Form 941
3. C. Form 944
4. D. Form 945

Correct Answer: D
Comprehensive and Detailed Explanation:Form 945is used byemployers to report federal income tax withholding from non-payroll payments, including payments toindependent contractorsif subject tobackup withholding.
✑ Option A (Form 940)is incorrect becauseForm 940 reports federal unemployment
taxes (FUTA).
✑ Option B (Form 941)is incorrect because it is used foremployee payroll tax reporting.
✑ Option C (Form 944)is incorrect because it is used forsmall employers filing annually.
Reference:
IRS Form 945 Instructions
Payroll.org – Independent Contractor Withholding Rules

- (Topic 2)
Using the table of taxable wages below, calculate the employer'sFICA tax liabilityon the first check of the year:

1. A. $2,387.00
2. B. $2,945.25
3. C. $5,890.50
4. D. $11,415.25

Correct Answer: B
✑ Total Taxable Wages:
✑ Social Security Tax (6.2%)
✑ Medicare Tax (1.45%)
✑ Total FICA Tax (Employer??s share) References:
✑ IRS Publication 15 (Employer??s Tax Guide)

- (Topic 2)
The reconciliation of an employee federal income tax withholding account occurs when which type of account is balanced?

1. A. Asset
2. B. Equity
3. C. Expense
4. D. Liability

Correct Answer: D
✑ Payroll taxes withheld from employees are consideredliabilitiesuntil they are remitted to the IRS or state agencies.
✑ Liability accounts track amounts owed, includingfederal income tax, Social Security, and Medicare withholdings.
✑ Expense accounts (C)track company payroll expenses but are not used for withholding reconciliations.
References:
✑ IRS Payroll Accounting Guidelines
✑ Payroll Tax Reconciliation Guide (Payroll.org)